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does not comply with ISRE 2400. Accordingly, the practitioner shall not include any reference
within the practitioner’s report to the review having been conducted in accordance with ISRE
2400.
31.5.4 If it is discovered after the engagement has been accepted that the practitioner is not
satisfied as to any of the above preconditions, the practitioner shall discuss the matter with
management or those charged with governance, and shall determine:
(a) Whether the matter can be resolved;
(b) Whether it is appropriate to continue with the engagement; and
(c) Whether and, if so, how to communicate the matter in the practitioner’s report.
31.5.5 The practitioner’s consideration of engagement continuance, and relevant ethical
requirements, including independence, occurs throughout the engagement, as conditions and
changes in circumstances occur. Performing initial procedures on engagement continuance
and evaluation of relevant ethical requirements (including independence) at the beginning of
an engagement informs the practitioner’s decisions and actions prior to the performance of
other significant activities for the engagement.
31.5.6 Assurance engagements may only be accepted when the engagement exhibits certain
characteristics that are conducive to achieving the practitioner’s objectives specified for the
engagement.
31.5.7 It may be unlikely that there is a rational purpose for the engagement if, for example:
(a) There is a significant limitation on the scope of the practitioner’s work;
(b) The practitioner suspects the engaging party intends to associate the practitioner’s name
with the financial statements in an inappropriate manner; or
(c) The engagement is intended to meet compliance requirements of relevant law or regulation
and such law or regulation requires the financial statements to be audited.
31.5.8 When the practitioner’s preliminary understanding of the engagement circumstances
indicates that accepting a review engagement would not be appropriate, the practitioner may
consider recommending that another type of engagement be undertaken. Depending on the
circumstances, the practitioner may, for example, believe that performance of an audit
engagement would be more appropriate than a review. In other cases, if the engagement
circumstances preclude performance of an assurance engagement, the practitioner may
recommend a compilation engagement, or other accounting services engagement, as
appropriate.
31.5.9 An example of where the practitioner may have cause to doubt that the information
needed to perform the review will be available or reliable is where the accounting records
necessary for purposes of performing analytical procedures are suspected to be substantially
inaccurate or incomplete. This consideration is not directed at the need that sometimes arises
in the course of a review engagement to assist management by recommending adjusting
entries required to finalize the financial statements prepared by management.
31.5.10 ISRE 2400 also requires the practitioner to ascertain certain matters, upon which it is
necessary for the practitioner and the entity’s management to agree, and which are within the
control of the entity, prior to the practitioner accepting the engagement.
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31.5.11 A condition for acceptance of an assurance engagement is that the criteria referred to
in the definition of an assurance engagement are suitable and available to intended users. For
purposes of ISRE 2400, the applicable financial reporting framework provides the criteria the
practitioner uses to review the financial statements including, where relevant, the fair
presentation of the financial statements. Some financial reporting frameworks are fair
presentation frameworks, while others are compliance frameworks. The requirements of the
applicable financial reporting framework determine the form and content of the financial
statements, including what constitutes a complete set of financial statements.
31.5.12 Without an acceptable financial reporting framework, management does not have an
appropriate basis for the preparation of the financial statements and the practitioner does not
have suitable criteria for the review of the financial statements.
31.5.13 The practitioner’s determination of the acceptability of the financial reporting
framework applied in the financial statements is made in the context of the practitioner’s
understanding of who the intended users of the financial statements are. The intended users
are the person, persons or group of persons for whom the practitioner prepares the report. The
practitioner may not be able to identify all those who will read the assurance report, particularly
where there is a large number of people who have access to it.
31.5.14 In many cases, in the absence of any indications to the contrary, the practitioner may
presume that the applicable financial reporting framework is acceptable (for example, a
financial reporting framework that is prescribed by law or regulation in a jurisdiction to be used
in the preparation of general purpose financial statements for certain types of entities).
31.5.15 Factors that are relevant to the practitioner’s determination of the acceptability of the
financial reporting framework to be applied in the preparation of the financial statements
include:
The nature of the entity (for example, whether it is a business enterprise, a public sector
entity or a not-for-profit organisation).
The purpose of the financial statements (for example, whether they are prepared to meet
the common financial information needs of a wide range of users or the financial
information needs of specific users).
The nature of the financial statements (for example, whether the financial statements are
a complete set of financial statements or a single financial statement).
Whether the applicable financial reporting framework is prescribed in relevant law or
regulation.
31.5.16 If the financial reporting framework used to prepare the financial statements is not
acceptable in view of the purpose of the financial statements and management will not agree
to use of a financial reporting framework that is acceptable in the practitioner’s view, the
practitioner is required under this ISRE to decline the engagement.
31.5.17 Deficiencies in the applicable financial reporting framework that indicate that the
framework is not acceptable may be encountered after the review engagement has been
accepted. When use of that financial reporting framework is not prescribed by law or
regulation, management may decide to adopt another framework that is acceptable. When
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management does so, the practitioner is required under this ISRE to agree the new terms of
the review engagement with management to reflect the change in the applicable financial
reporting framework.
Additional Considerations When the Wording of the Practitioner’s Report Is Prescribed
by Law or Regulation
31.5.18 In some cases, when the review is performed pursuant to applicable law or regulation
of a jurisdiction, the relevant law or regulation may prescribe the layout or wording of the
practitioner’s report in a form or in terms that are significantly different from the requirements of
ISRE 2400. In those circumstances, the practitioner shall evaluate whether users might
misunderstand the assurance obtained from the review of the financial statements and, if so,
whether additional explanation in the practitioner’s report can mitigate possible
misunderstanding.
31.5.19 ISRE 2400 requires the practitioner to not represent compliance with ISRE 2400
unless the practitioner has complied with all the requirements of ISRE 2400 that are relevant to
the review engagement. Law or regulation may prescribe matters in relation to an engagement
that would ordinarily cause the practitioner to decline the engagement were it possible to do
so, for example, if:
The practitioner considers that the financial reporting framework prescribed by law or
regulation is not acceptable; or
The prescribed layout or wording of the practitioner’s report is in a form or in terms that
are significantly different from the layout or wording required by ISRE 2400.
Under ISRE 2400, a review conducted in these situations does not comply with this ISRE and
the practitioner cannot represent compliance with this ISRE in the report issued for the
engagement. Notwithstanding that the practitioner is not permitted to represent compliance
with this ISRE, the practitioner is, however, encouraged to apply this ISRE, including the
reporting requirements, to the extent practicable. When appropriate to avoid misunderstanding,
the practitioner may consider including a statement in the report that the review is not
conducted in accordance with this ISRE.
31.5.20 If the practitioner concludes that additional explanation in the practitioner’s report
cannot mitigate possible misunderstanding, the practitioner shall not accept the review
engagement unless required by law or regulation to do so. A review conducted in accordance
with such law or regulation does not comply with ISRE 2400. Accordingly, the practitioner shall
not include any reference within the practitioner’s report to the review having been conducted
in accordance with ISRE 2400
31.6 Agreeing the terms of the engagement
31.6.1 The practitioner shall agree the terms of the engagement with management or those
charged with governance, as appropriate, prior to performing the engagement.
31.6.2 It is in the interests of both management and those charged with governance, and the
practitioner, that the practitioner sends an engagement letter prior to performing the review
engagement, to help avoid misunderstandings with respect to the engagement.
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31.6.3 In a review of financial statements, the practitioner expresses a conclusion that is
designed to enhance the degree of confidence of intended users regarding the preparation of
an entity’s financial statements in accordance with an applicable financial reporting framework.
The practitioner’s conclusion is based on the practitioner obtaining limited assurance. The
practitioner’s report includes a description of the nature of a review engagement as context for
the readers of the report to be able to understand the conclusion.
31.6.4 The agreed terms of engagement shall be recorded in an engagement letter or other
suitable form of written agreement, and shall include:
(a) The intended use and distribution of the financial statements, and any restrictions on use or
distribution where applicable;
(b) Identification of the applicable financial reporting framework;
(c) The objective and scope of the review engagement;
(d) The responsibilities of the practitioner;
(e) The responsibilities of management, including those in paragraph 31.5.2(b);
(f) A statement that the engagement is not an audit, and that the practitioner will not express
an audit opinion on the financial statements; and
(g) Reference to the expected form and content of the report to be issued by the practitioner,
and a statement that there may be circumstances in which the report may differ from its
expected form and content.
31.6.5 The form and content of the engagement letter may vary for each engagement. In
addition to including the matters required by this ISRE, an engagement letter may make
reference to, for example:
Arrangements concerning the involvement of other practitioners and experts in the review
engagement.
Arrangements to be made with the predecessor practitioner, if any, in the case of an initial
engagement.
The fact that a review engagement will not satisfy any statutory or third party
requirements for an audit.
The expectation that management will provide written representations to the practitioner.
The agreement of management to inform the practitioner of facts that may affect the
financial statements of which management may become aware during the period from the
date of the practitioner’s report to the date the financial statements are issued.
A request for management to acknowledge receipt of the engagement letter and to agree
to the terms of the engagement outlined therein.
31.6.6 On recurring review engagements, the practitioner shall evaluate whether
circumstances, including changes in the engagement acceptance considerations, require the
terms of engagement to be revised and whether there is a need to remind management or
those charged with governance, as appropriate, of the existing terms of engagement.
31.6.7 The practitioner shall not agree to a change in the terms of the engagement where
there is no reasonable justification for doing so.
31.6.8 If, prior to completing the review engagement, the practitioner is requested to change
the engagement to an engagement for which no assurance is obtained, the practitioner shall
determine whether there is reasonable justification for doing so.
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31.6.9 If the terms of engagement are changed during the course of the engagement, the
practitioner and management or those charged with governance, as appropriate, shall agree
on and record the new terms of the engagement in an engagement letter or other suitable form
of written agreement.
31.6.10 The financial statements subject to review are those of the entity, prepared by
management of the entity with oversight from those charged with governance. This ISRE does
not impose responsibilities on management and those charged with governance, nor does it
override laws and regulations that govern their respective responsibilities. However, a review
in accordance with ISRE 2400 is conducted on the premise that management, and those
charged with governance as appropriate, have acknowledged certain responsibilities that are
fundamental to the conduct of the review. The review of the financial statements does not
relieve management and those charged with governance of their responsibilities.
31.6.11 As part of its responsibility for the preparation of the financial statements, management
is required to exercise judgement in making accounting estimates that are reasonable in the
circumstances, and to select and apply appropriate accounting policies. These judgements are
made in the context of the applicable financial reporting framework.
31.6.12 Because of the significance of the preconditions for undertaking a review of financial
statements, the practitioner is required under ISRE 400 to obtain the agreement of
management that it understands its responsibilities before accepting a review engagement.
The practitioner may obtain management’s agreement either orally or in writing. However,
management’s agreement is subsequently recorded within the written terms of the
engagement.
31.6.13 If management, and those charged with governance where appropriate, do not or will
not acknowledge their responsibilities in relation to the financial statements, it is not
appropriate to accept the engagement unless law or regulation requires the practitioner to do
so. In circumstances where the practitioner is required to accept the review engagement, the
practitioner may need to explain to management and those charged with governance, where
different, the importance of these matters and the implications for the engagement.
31.6.14 The auditor of the financial statements of a group of entities may request that a
practitioner perform a review of the financial information of a component entity of the group.
Depending on the instructions of the group auditor, a review of the financial information of a
component may be performed in accordance with ISRE 2400. The group auditor may also
specify additional procedures to supplement the work done for the review performed under
ISRE 2400. Where the practitioner conducting the review is the auditor of the component
entity’s financial statements, the review is not performed in accordance with ISRE 2400.
31.6.15 If, in the circumstances of the engagement, the practitioner concludes that it is not
necessary to record certain terms of the engagement in an engagement letter, the practitioner
is still required to seek the written agreement from management, and those charged with
governance where appropriate, required under ISRE 2400 that they acknowledge and
understand their responsibilities set out in ISRE 2400. This written agreement may use the
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wording of the law or regulation if the law or regulation establishes responsibilities for
management that are equivalent in effect to those described in ISRE 2400.
31.6.16 An illustrative engagement letter for a review engagement is set out in Appendix 1
31.6.17 The practitioner may decide not to send a new engagement letter or other written
agreement each period. However, the following factors may indicate that it is appropriate to
revise the terms of the review engagement or to remind management and those charged with
governance, as appropriate, of the existing terms of the engagement:
Any indication that management misunderstands the objective and scope of the review.
Any revised or special terms of the engagement.
A recent change of senior management of the entity.
A significant change in ownership of the entity.
A significant change in nature or size of the entity’s business.
A change in legal or regulatory requirements affecting the entity.
A change in the applicable financial reporting framework.
31.6.18 A request from the entity for the practitioner to change the terms of the review
engagement may result from factors including:
A change in circumstances affecting the need for the service.
Misunderstanding as to the nature of a review engagement as originally requested.
A restriction on the scope of the review engagement, whether imposed by management
or caused by other circumstances.
31.6.19 A change in circumstances that affects the entity’s requirements or a
misunderstanding concerning the nature of the service originally requested may be considered
a reasonable basis for requesting a change to the terms of the review engagement.
31.6.20 In contrast, a change may not be considered reasonable if it appears that the change
relates to information that is incorrect, incomplete or otherwise unsatisfactory. An example
might be where the practitioner is unable to obtain sufficient appropriate evidence for a
material item in the financial statements, and management asks for the engagement to be
changed to a related services engagement to avoid the expression of a modified
conclusion by the practitioner.
31.6.21 Before agreeing to change a review engagement to another type of engagement or
related service, a practitioner who was engaged to perform a review in accordance with ISRE
2400 may need to assess, in addition to the matters referred to in ISRE 2400, any legal or
contractual implications of the change.
31.6.22 If the practitioner concludes that there is reasonable justification to change the review
engagement to another type of engagement or related service, the work performed in the
review engagement to the date of change may be relevant to the changed engagement;
however, the work required to be performed and the report to be issued would be those
appropriate to the revised engagement. In order to avoid confusing the reader, the report on
the other engagement or related service would not include reference to:
(a) The original review engagement; or
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(b) Any procedures that may have been performed in the original review engagement, except
where the review engagement is changed to an engagement to perform agreed-upon
procedures and thus reference to the procedures performed is a normal part of the report.
31.7 Communication with Management and Those Charged with Governance
31.7.1 The practitioner shall communicate with management or those charged with
governance, as appropriate, on a timely basis during the course of the review engagement, all
matters concerning the review engagement that, in the practitioner’s professional judgement,
are of sufficient importance to merit the attention of management or those charged with
governance, as appropriate.
31.7.2 In a review engagement, the practitioner’s communications with management and those
charged with governance take the form of:
(a) Enquiries the practitioner makes in the course of performing the procedures for the review;
and
(b) Other communications, in the context of having effective two-way communication to
understand matters arising and to develop a constructive working relationship for the
engagement.
31.7.3 The appropriate timing for communications will vary with the circumstances of the
engagement. Relevant factors include the significance and nature of the matter, and any action
expected to be taken by management or those charged with governance. For example, it may
be appropriate to communicate a significant difficulty encountered during the review as soon
as practicable if management or those charged with governance are able to assist the
practitioner to overcome the difficulty.
31.7.4 Law or regulation may restrict the practitioner’s communication of certain matters with
those charged with governance. For example, law or regulation may specifically prohibit a
communication, or other action, that might prejudice an investigation by an appropriate
authority into an actual, or suspected, illegal act. In some circumstances, potential conflicts
between the practitioner’s obligations of confidentiality and obligations to communicate
may be complex. In such cases, the practitioner may consider obtaining legal advice.
31.7.5 Matters to be communicated to management or those charged with governance, as
appropriate, under ISRE 2400 may include:
The practitioner’s responsibilities in the review engagement, as included in the
engagement letter or other suitable form of written agreement.
Significant findings from the review, for example:
• The practitioner’s views about significant qualitative aspects of the entity’s accounting
practices, including accounting policies, accounting estimates and financial statement
disclosures.
• Significant findings from the performance of procedures, including situations where the
practitioner considered performance of additional procedures necessary under ISRE
2400. The practitioner may need to confirm that those charged with governance have
the same understanding of the facts and circumstances relevant to specific transactions
or events.
• Matters arising that may lead to modification of the practitioner’s conclusion.
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• Significant difficulties, if any, encountered during the review; for example, unavailability
of expected information; unexpected inability to obtain evidence that the practitioner
considers necessary for the review; or restrictions imposed on the practitioner by
management. In some circumstances, such difficulties may constitute a scope limitation
that, if not addressed by management or those charged with governance, may lead to
modification of the practitioner’s conclusion or to the practitioner’s withdrawal from the
engagement in certain circumstances.
31.7.6 In some entities, different persons are responsible for the management and the
governance of an entity. In these circumstances, management may have the responsibility to
communicate matters of governance interest to those charged with governance.
Communication by management with those charged with governance of matters that the
practitioner is required to communicate does not relieve the practitioner of the responsibility to
also communicate them to those charged with governance. However, communication of these
matters by management may affect the form or timing of the practitioner’s communication with
those charged with governance.
31.7.7 In some jurisdictions, the practitioner may be required by law or regulation to, for
example:
Notify a regulatory or enforcement body of certain matters communicated with those
charged with governance. For example, in some jurisdictions the practitioner has a duty to
report misstatements to authorities where management and those charged with
governance fail to take corrective action.
Submit copies of certain reports prepared for those charged with governance to relevant
regulatory or funding bodies or, in some cases, make such reports publicly available.
31.7.8 Unless required by law or regulation to provide a third party with a copy of the
practitioner’s written communications with those charged with governance, the practitioner may
need the prior consent of management or those charged with governance before doing so.
31.8 Procedures for a review of an interim financial report
31.8.1 The practitioner performs primarily enquiry and analytical procedures to obtain sufficient
appropriate evidence as the basis for a conclusion on the financial statements as a whole,
expressed in accordance with the requirements of this ISRE.
31.8.2 If the practitioner becomes aware of a matter that causes the practitioner to believe the
financial statements may be materially misstated, the practitioner designs and performs
additional procedures, as the practitioner considers necessary in the circumstances, to be able
to conclude on the financial statements.
31.8.3 The practitioner shall obtain an understanding of the entity and its environment, and the
applicable financial reporting framework, to identify areas in the financial statements where
material misstatements are likely to arise and thereby provide a basis for designing procedures
to address those areas.
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31.8.4 The practitioner’s understanding shall include the following:
(a) Relevant industry, regulatory, and other external factors including the applicable financial
reporting framework;
(b) The nature of the entity, including:
(i) Its operations;
(ii) Its ownership and governance structure;
(iii) The types of investments that the entity is making and plans to make;
(iv) The way that the entity is structured and how it is financed; and
(v) The entity’s objectives and strategies;
(c) The entity’s accounting systems and accounting records; and
(d) The entity’s selection and application of accounting policies.
31.8.5 An understanding of the entity and its environment should be obtained, including its
internal control, as it relates to the preparation of both the annual and interim financial
information, sufficient to plan and conduct the engagement so as to be able to:
Identify the types of potential material misstatements and consider the likelihood of their
occurrence; and
Select the review procedures that will provide the auditor with a basis for reporting
whether anything has come to his attention that causes the auditor to believe that the
interim financial information is not prepared, in all material respects, in accordance with
the applicable financial reporting framework.
31.8.6 Refer to chapter 7 of the manual and ISA 315 Identifying and Assessing the Risks of
Material Misstatement through Understanding the Entity and its Environment for further details.
31.8.7 The procedures performed to update the understanding of the entity and its
environment, including its internal control, ordinarily include the following:
Reading the documentation of the preceding year’s audits and reviews of prior interim
periods, to identify matters that may affect the current-period interim financial information;
Considering any significant risks, including the risk of management override of controls,
that were identified in the audit of the prior period’s financial information;
Reading the most recent annual and comparable prior period interim financial
information;
Considering materiality to assist in determining the nature and extent of the procedures to
be performed and evaluating the effect of misstatements;
Considering the nature of any corrected material misstatements and any identified
uncorrected immaterial misstatements in the prior year’s financial statements;
Considering significant financial accounting and reporting matters that may be of
continuing significance such as material weaknesses in internal control;
Considering the results of any audit procedures performed with respect to the current
period’s financial statements;
Considering the results of any internal audit performed and the subsequent actions taken
by management;
Enquiring of management about the results of management’s assessment of the risk that
the interim financial information may be materially misstated as a result of fraud;
Enquiring of management about the effect of changes in the entity’s business activities;
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Enquiring of management about any significant changes in internal control and the
potential effect of any such changes on the preparation of the interim financial
information; and
Enquiring of management of the process by which the interim financial report has been
prepared and the reliability of the underlying accounting records to which the interim
financial information is agreed or reconciled.
31.8.8 A recently appointed auditor who has not yet performed an audit of the entity should
obtain an understanding of the entity and its environment, including its internal control, as it
relates to the preparation of both the information to be audited and the information to be
reviewed.
31.8.9 The practitioner uses professional judgement to determine the extent of the
understanding of the entity and its environment required to perform the review of the entity’s
financial statements in accordance with ISRE 2400. The practitioner’s primary consideration is
whether the understanding obtained is sufficient to meet the practitioner’s objectives for the
engagement. The breadth and depth of the overall understanding that the practitioner obtains
is less than that possessed by management.
31.8.10 Obtaining an understanding of the entity and its environment is a continual dynamic
process of gathering, updating and analysing information throughout the review engagement.
The practitioner’s understanding is obtained and applied on an iterative basis throughout
performance of the engagement, and is updated as changes in conditions and circumstances
occur. Initial procedures for engagement acceptance and continuance at the time of
commencement of a review engagement are based on the practitioner’s preliminary
understanding of the entity and of the engagement circumstances. In a continuing client
relationship, the practitioner’s understanding includes knowledge obtained from prior
engagements performed by the practitioner in relation to the entity’s financial statements
and other financial information.
31.8.11 The understanding establishes a frame of reference within which the practitioner plans
and performs the review engagement, and exercises professional judgement throughout the
engagement. Specifically, the understanding needs to be sufficient for the practitioner to be
able to identify areas in the financial statements where material misstatements are likely to
arise, to inform the practitioner’s approach to designing and performing procedures to address
those areas.
31.8.12 In obtaining an understanding of the entity and its environment, and of the applicable
financial reporting framework, the practitioner may also consider:
Whether the entity is a component of a group of entities, or an associated entity of
another entity.
The complexity of the financial reporting framework.
The entity’s financial reporting obligations or requirements, and whether those obligations
or requirements exist under applicable law or regulation or in the context of voluntary
financial reporting arrangements established under formalized governance or
accountability arrangements, for example, under contractual arrangements with third
parties.
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Relevant provisions of laws and regulations that are generally recognized to have a direct
effect on the determination of material amounts and disclosures in the financial
statements, such as tax and pension laws and regulations.
The level of development of the entity’s management and governance structure regarding
management and oversight of the entity’s accounting records and financial reporting
systems that underpin preparation of the financial statements. Smaller entities often have
fewer employees, which may influence how management exercises oversight. For
example, segregation of duties may not be practicable. However, in a small owner-
managed entity, the owner-manager may be able to exercise more effective oversight
than in a larger entity. This oversight may compensate for the generally more limited
opportunities for segregation of duties.
The “tone at the top” and the entity’s control environment through which the entity
addresses risks relating to financial reporting and compliance with the entity’s financial
reporting obligations.
The level of development and complexity of the entity’s financial accounting and reporting
systems and related controls through which the entity’s accounting records and related
information are maintained.
The entity’s procedures for recording, classifying and summarizing transactions,
accumulating information for inclusion in the financial statements and related disclosures.
The types of matters that required accounting adjustments in the entity’s financial
statements in prior periods.
31.9 Considerations after engagement acceptance
31.9.1 If the engagement partner obtains information that would have caused the firm to
decline the engagement had that information been available earlier, the engagement partner
shall communicate that information promptly to the firm, so that the firm and the engagement
partner can take the necessary action.
31.10 Compliance with Relevant Ethical Requirements
31.10.1 Throughout the engagement, the engagement partner shall remain alert, through
observation and making enquiries as necessary, for evidence of noncompliance with relevant
ethical requirements by members of the engagement team. If matters come to the engagement
partner’s attention through the firm’s system of quality control or otherwise that indicate that
members of the engagement team have not complied with relevant ethical requirements, the
engagement partner, in consultation with others in the firm, shall determine the appropriate
action.
31.11 Materiality
31.11.1 Materiality needs to be considered, using professional judgement, when:
Determining the nature, timing and extent of review procedures; and
Evaluating the effect of misstatements.
31.11.2 Materiality for a review of interim financial information is based on the interim period
financial data and accordingly materiality may be less than materiality for annual financial data.
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31.11.3 If the entity’s business is subject to cyclical variations or if the financial results for the
current period show an exceptional decrease or increase, the auditor may conclude that
materiality is more appropriately determined using a normalised figure for the interim period.
31.11.4 The same materiality considerations should be applied as if an audit opinion was to be
given. Although there is greater risk that misstatements will not be detected in a review than in
an audit, the judgement as to what is material is by reference to the information being reported
on, and the needs of those relying on that information, not on the level of assurance provided.
31.11.5 The practitioner shall determine materiality for the financial statements as a whole, and
apply this materiality in designing the procedures and in evaluating the results obtained from
those procedures.
31.11.6 The practitioner shall revise materiality for the financial statements as a whole in the
event of becoming aware of information during the review that would have caused the
practitioner to have determined a different amount initially.
31.11.7 The practitioner’s consideration of materiality is made in the context of the applicable
financial reporting framework. Some financial reporting frameworks discuss the concept of
materiality in the context of the preparation and presentation of financial statements. Although
financial reporting frameworks may discuss materiality in different terms, they generally explain
that:
Misstatements, including omissions, are considered to be material if they, individually or
in the aggregate, could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements;
Judgements about materiality are made in light of surrounding circumstances, and are
affected by the size or nature of a misstatement, or a combination of both; and
Judgements about matters that are material to users of the financial statements are
based on a consideration of the common financial information needs of users as a group.
The possible effect of misstatements on specific individual users, whose needs may vary
widely, is not considered.
31.11.8 If present in the applicable financial reporting framework, a discussion of the concept
of materiality provides a frame of reference for the practitioner in determining materiality for the
review. If not present, the above considerations provide the practitioner with a frame of
reference.
31.11.9 The practitioner’s determination of materiality is a matter of professional judgement,
and is affected by the practitioner’s perception of the needs of the intended users of the
financial statements. In this context, it is reasonable for the practitioner to assume that users:
Have a reasonable knowledge of business and economic activities and accounting, and a
willingness to study the information in the financial statements with reasonable diligence;
Understand that financial statements are prepared, presented and reviewed to levels of
materiality;
Recognize the uncertainties inherent in the measurement of amounts based on the use of
estimates, judgement and the consideration of future events; and
Make reasonable economic decisions on the basis of the information in the financial
statements.
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Further, unless the review engagement is undertaken for financial statements that are intended
to meet the particular needs of specific users, the possible effect of misstatements on specific
users, whose information needs may vary widely, is not ordinarily considered.
31.11.10 The practitioner’s judgement about what is material in relation to the financial
statements as a whole is the same regardless of the level of assurance obtained by a
practitioner as the basis for expressing the conclusion on the financial statements.
31.11.11 The practitioner’s determination of materiality for the financial statements as a whole
may need to be revised during the engagement as a result of:
A change in the circumstances that occurred during the review (for example, a decision to
dispose of a major part of the entity’s business).
New information, or a change in the practitioner’s understanding of the entity and its
environment as a result of performing procedures for the review in accordance with ISRE
2400 (for example, if during the review it appears as though actual financial results are
likely to be substantially different from the anticipated period-end financial results that
were used initially to determine materiality for the financial statements as a whole).
31.11.7 Refer to Chapter 11.3 and 11.4 of the manual and ISA 320 Materiality in Planning and
Performing an Audit for guidance on selecting materiality levels.
31.12 Enquiries, analytical and other review procedures
31.12.1 In obtaining sufficient appropriate evidence as the basis for a conclusion on the
financial statements as a whole, the practitioner shall design and perform enquiry and
analytical procedures:
(a) To address all material items in the financial statements, including disclosures; and
(b) To focus on addressing areas in the financial statements where material misstatements are
likely to arise.
31.12.2 The practitioner’s enquiries of management and others within the entity, as
appropriate, shall include the following:
(a) How management makes the significant accounting estimates required under the
applicable financial reporting framework;
(b) The identification of related parties and related party transactions, including the purpose of
those transactions;
(c) Whether there are significant, unusual or complex transactions, events or matters that have
affected or may affect the entity’s financial statements, including:
(i) Significant changes in the entity’s business activities or operations;
(ii) Significant changes to the terms of contracts that materially affect the entity’s financial
statements, including terms of finance and debt contracts or covenants;
(iii) Significant journal entries or other adjustments to the financial statements;
(iv) Significant transactions occurring or recognized near the end of the reporting period;
(v) The status of any uncorrected misstatements identified during previous engagements;
and
(vi) Effects or possible implications for the entity of transactions or relationships with
related parties;
(d) The existence of any actual, suspected or alleged:
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(i) Fraud or illegal acts affecting the entity; and
(ii) Non-compliance with provisions of laws and regulations that are generally recognized
to have a direct effect on the determination of material amounts and disclosures in the
financial statements, such as tax and pension laws and regulations;
(e) Whether management has identified and addressed events occurring between the date of
the financial statements and the date of the practitioner’s report that require adjustment of, or
disclosure in, the financial statements;
(f) The basis for management’s assessment of the entity’s ability to continue as a going
concern;
(g) Whether there are events or conditions that appear to cast doubt on the entity’s ability to
continue as a going concern;
(h) Material commitments, contractual obligations or contingencies that have affected or may
affect the entity’s financial statements, including disclosures; and
(i) Material non-monetary transactions or transactions for no consideration in the financial
reporting period under consideration.
31.12.3 The planned nature, timing and extent of the procedures the practitioner considers are
needed to obtain sufficient appropriate evidence as the basis for a conclusion on the financial
statements as a whole are influenced by:
(a) The requirements of ISRE 2400; and
(b) Requirements established under applicable law or regulation, including additional reporting
requirements contained in applicable laws or regulations.
31.12.4 When the practitioner is engaged to review the financial statements of a group of
entities, the planned nature, timing and extent of the procedures for the review are directed at
achieving the practitioner’s objectives for the review engagement stated in ISRE 2400, but in
the context of the group financial statements.
31.12.5 The requirements of ISRE 2400 relating to designing and performing enquiry and
analytical procedures, and procedures addressing specific circumstances, are designed to
enable the practitioner to achieve the objectives specified in ISRE 2400. The circumstances of
review engagements vary widely and, accordingly, there may be circumstances where the
practitioner may consider it effective or efficient to design and perform other procedures. For
example, if in the course of obtaining an understanding of the entity, the practitioner becomes
aware of a significant contract the practitioner may choose to read the contract.
31.12.6 The fact that the practitioner may deem it necessary to perform other procedures does
not alter the practitioner’s objective of obtaining limited assurance in relation to the financial
statements as a whole.
31.12.7 The practitioner may consider reviewing the accounting records with a view to
identifying significant or unusual transactions that may require specific attention in the review.
31.12.8 In a review, enquiry includes seeking information of management and other persons
within the entity, as the practitioner considers appropriate in the engagement circumstances.
The practitioner may also extend enquiries to obtain non-financial data if appropriate.
Evaluating the responses provided by management is integral to the enquiry process.
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31.12.9 Depending on the engagement circumstances, enquiries may also include enquiries
about:
Actions taken at meetings of owners, those charged with governance and committees
thereof, and proceedings at other meetings, if any, that affect the information and
disclosures contained in the financial statements.
Communications the entity has received, or expects to receive or obtain, from regulatory
agencies.
Matters arising in the course of applying other procedures. When performing further
enquiries in relation to identified inconsistencies, the practitioner considers the
reasonableness and consistency of management’s responses in light of the results
obtained from other procedures, and the practitioner’s knowledge and understanding of
the entity and the industry in which it operates.
31.12.10 Evidence obtained through enquiry is often the principal source of evidence about
management intent. However, information available to support management’s intent may be
limited. In that case, understanding management’s past history of carrying out its stated
intentions, management’s stated reasons for choosing a particular course of action, and
management’s ability to pursue a specific course of action may provide relevant information to
corroborate the evidence obtained through enquiry. Application of professional scepticism in
evaluating responses provided by management is important to enable the practitioner to
evaluate whether there are any matter(s) that would cause the practitioner to believe the
financial statements may be materially misstated.
31.12.11 Performing enquiry procedures assists the practitioner also in obtaining or updating
the practitioner’s understanding of the entity and its environment, to be able to identify areas
where material misstatements are likely to arise in the financial statements.
31.12.12 Often in smaller entities, management may not have prepared an assessment of the
entity’s ability to continue as a going concern, but instead may rely on knowledge of the
business and anticipated future prospects. In these circumstances, it may be appropriate to
discuss the medium and long-term prospects and financing of the entity with management,
including consideration of whether management’s contentions are not inconsistent
with the practitioner’s understanding of the entity.
31.12.13 In designing analytical procedures, the practitioner shall consider whether the data
from the entity’s accounting system and accounting records are adequate for the purpose of
performing the analytical procedures.
31.12.14 In a review of financial statements, performing analytical procedures assists the
practitioner in:
Obtaining or updating the practitioner’s understanding of the entity and its environment,
including to be able to identify areas where material misstatements are likely to arise in
the financial statements.
Identifying inconsistencies or variances from expected trends, values or norms in the
financial statements such as the level of congruence of the financial statements with key
data, including key performance indicators.
Providing corroborative evidence in relation to other enquiry or analytical procedures
already performed.
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Serving as additional procedures when the practitioner becomes aware of matter(s) that
cause the practitioner to believe that the financial statements may be materially
misstated. An example of such an additional procedure is a comparative analysis of
monthly revenue and cost figures across profit centres, branches or other components of
the entity, to provide evidence about financial information contained in line items or
disclosures contained in the financial statements.
31.12.15 Various methods may be used to perform analytical procedures. These methods
range from performing simple comparisons to performing complex analysis using statistical
techniques. The practitioner may, for example, apply analytical procedures to evaluate the
financial information underlying the financial statements through analysis of plausible
relationships among both financial and non-financial data, and assessment of results for
consistency with expected values with a view to identifying relationships and individual items
that appear unusual, or that vary from expected trends or values. The practitioner would
compare recorded amounts, or ratios developed from recorded amounts, to expectations
developed by the practitioner from information obtained from relevant sources. Examples of
sources of information the practitioner often uses to develop expectations, depending on the
engagement circumstances, include:
Financial information for comparable prior period(s), taking known changes into account.
Information about expected operating and financial results, such as budgets or forecasts
including extrapolations from interim or annual data.
Relationships among elements of financial information within the period.
Information regarding the industry in which the entity operates, such as gross margin
information, or comparison of the entity’s ratio of sales to accounts receivable with
industry averages or with other entities of comparable size in the same industry.
Relationships of financial information with relevant non-financial information, such as
payroll costs to number of employees.
31.12.16 The practitioner’s consideration of whether data to be used for analytical procedures
are satisfactory for the intended purpose(s) of those procedures is based on the practitioner’s
understanding of the entity and its environment, and is influenced by the nature and source of
the data, and by the circumstances in which the data are obtained. The following
considerations may be relevant:
Source of the information available. For example, information may be more reliable when
it is obtained from independent sources outside the entity;
Comparability of the information available. For example, broad industry data may need to
be supplemented or be adjusted to be comparable to data of an entity that produces and
sells specialised products;
Nature and relevance of the information available; for example, whether the entity’s
budgets are established as results to be expected rather than as goals to be achieved;
and
The knowledge and expertise involved in the preparation of the information, and related
controls that are designed to ensure its completeness, accuracy and validity. Such
controls may include, for example, controls over the preparation, review and maintenance
of budgetary information.
31.12.17 Enquiries should be made, primarily of persons responsible for financial and
accounting matters, and analytical and other review procedures performed to enable the
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auditor to conclude whether anything has come to the auditor’s attention that causes the
auditor to believe that the interim financial report is not prepared, in all material respects, in
accordance with the applicable financial reporting framework.
31.12.18 ISRE 2410 suggests that the auditor ordinarily performs the following procedures:
Reading the minutes of the meetings of shareholders, those charged with governance
and other appropriate committees to identify matters that affect the interim financial
report, and enquiring about matters dealt with at meetings.
Considering the effect of matters giving rise to a modification of the review report,
accounting adjustments or unadjusted misstatements, at the time of the previous audits
or reviews.
Communicating with other auditors who are performing a review of the interim financial
report of the entity’s significant components. Refer to chapter 30.3.43 and ISA 600
Special Considerations – Audits of Group Financial Statements (including the work of
Component Auditors).
Inquiring of management responsible for financial and accounting matters about the
following:
• Whether the interim financial information has been prepared and presented in
accordance with the applicable financial reporting framework;
• Whether there have been any changes in accounting principles;
• Whether any new transactions have resulted in the application of a new accounting
principle;
• Whether there are any known uncorrected mistakes in the interim financial
information;
• Unusual or complex transactions that may have affected the interim financial
information;
• Significant assumptions that are relevant to the fair value measurement or
disclosures and management’s intention and ability to carry out specific courses of
action on behalf of the entity;
• Whether related party transactions have been appropriately disclosed in the interim
financial information (refer to chapter 19 of the Manual and IAS 550 Related
Parties);
• Significant changes in commitments and contractual obligations;
• Significant changes in contingent assets and contingent liabilities including litigation
or claims;
• Compliance with debt covenants;
• Matters about which questions have arisen in the course of applying the review
procedures;
• Significant transactions occurring close to year end, both prior and subsequent to
year end;
• Knowledge of any fraud or suspected fraud affecting the entity involving
management and employees who have significant roles in internal control or others
where the fraud could have a material effect on the interim financial information; and
• Knowledge of any actual or possible non-compliance with laws and regulations that
could have a material effect on the interim financial information.
Applying analytical procedures designed to identify relationships and individual items
that appear to be unusual and that may reflect a material misstatement in the interim
financial report. This may include ratio analysis, trend analysis or regression analysis.
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Reading the financial information and considering whether anything has come to the
auditor’s attention that causes the auditor to believe that the interim financial information
is not provided in all material respects with the applicable financial reporting framework.
31.12.19 Evidence should be obtained so that the interim financial information agrees or
reconciles with the underlying accounting records. This can be performed by tracing the
interim financial information to the accounting records, such as the general ledger, or a
consolidation schedule that agrees or reconciles with the accounting records.
31.12.20 During the review, the practitioner shall remain alert for arrangements or information
that may indicate the existence of related party relationships or transactions that management
has not previously identified or disclosed to the practitioner.
31.12.21 If the practitioner identifies significant transactions outside the entity’s normal course
of business in the course of performing the review, the practitioner shall enquire of
management about:
(a) The nature of those transactions;
(b) Whether related parties could be involved; and
(c) The business rationale (or lack thereof) of those transactions.
31.13 Fraud and non-compliance with laws and regulations
31.13.1 When there is an indication that fraud or non-compliance with laws or regulations, or
suspected fraud or non-compliance with laws or regulations, has occurred in the entity, the
practitioner shall:
(a) Communicate that matter to the appropriate level of senior management or those charged
with governance as appropriate;
(b) Request management’s assessment of the effect(s), if any, on the financial statements;
(c) Consider the effect, if any, of management’s assessment of the effects of fraud or non-
compliance with laws or regulations communicated to the practitioner on the practitioner’s
conclusion on the financial statements and on the practitioner’s report; and
(d) Determine whether there is a responsibility to report the occurrence or suspicion of fraud or
illegal acts to a party outside the entity.
31.12.2 Under ISRE 2400, if the practitioner has identified or suspects fraud or illegal acts, the
practitioner is required to determine whether there is a responsibility to report the occurrence
or suspicion to a party outside the entity. Although the practitioner’s professional duty to
maintain the confidentiality of client information may preclude such reporting, the practitioner’s
legal responsibilities may override the duty of confidentiality in some circumstances.
31.14 Going concern
31.14.1 A review of financial statements includes consideration of the entity’s ability to
continue as a going concern. In considering management’s assessment of the entity’s ability to
continue as a going concern, the practitioner shall cover the same period as that used by
management to make its assessment as required by the applicable financial reporting
framework, or by law or regulation where a longer period is specified.
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31.14.2 If, during the performance of the review, the practitioner becomes aware of events or
conditions that may cast significant doubt about the entity’s ability to continue as a going
concern, the practitioner shall:
(a) Enquire of management about plans for future actions affecting the entity’s ability to
continue as a going concern and about the feasibility of those plans, and also whether
management believes the outcome of those plans will improve the situation regarding the
entity’s ability to continue as a going concern;
(b) Evaluate the results of those enquiries, to consider whether management’s responses
provide a sufficient basis to:
(i) Continue to present the financial statements on the going concern basis if the
applicable financial reporting framework includes the assumption of an entity’s
continuance as a going
concern; or
(ii) Conclude whether the financial statements are materially misstated, or are otherwise
misleading regarding the entity’s ability to continue as a going concern; and
(c) Consider management’s responses in light of all relevant information of which the
practitioner is aware as a result of the review.
31.14.3 The list of factors below gives examples of events or conditions that, individually or
collectively, may cast significant doubt about the going concern assumption. The list is not all-
inclusive, and the existence of one or more of the items does not always signify that
uncertainty exists about whether the entity can continue as a going concern.
Financial
Net liability or net current liability position
Fixed-term borrowings approaching maturity without realistic prospects of renewal or
repayment, or excessive reliance on short-term borrowings to finance long-term assets
Indications of withdrawal of financial support by creditors
Negative operating cash flows indicated by historical or prospective financial statements
Adverse key financial ratios
Substantial operating losses or significant deterioration in the value of assets used to
generate cash flows
Arrears or discontinuance of dividends
Inability to pay creditors on due dates
Inability to comply with the terms of loan agreements
Change from credit to cash-on-delivery transactions with suppliers
Inability to obtain financing for essential new product development or other essential
investments
Operating
Management intentions to liquidate the entity or to cease operations
Loss of key management without replacement
Loss of a major market, key customer(s), franchise, license, or principal supplier(s)
Labour difficulties
Shortages of important supplies
Emergence of a highly successful competitor
Other
Non-compliance with capital or other statutory requirements
Pending legal or regulatory proceedings against the entity that may, if successful, result
in claims that the entity is unlikely to be able to satisfy
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Changes in law or regulation or government policy expected to adversely affect the
entity
Uninsured or underinsured catastrophes when they occur The significance of such
events or conditions often can be mitigated by other factors. For example, the effect of
an entity being unable to make its normal debt repayments may be counter-balanced by
management’s plans to maintain adequate cash flows by alternative means, such as by
disposing of assets, rescheduling loan repayments, or obtaining additional capital.
Similarly, the loss of a principal supplier may be mitigated by the availability of a suitable
alternative source of supply.
31.15 Use of work performed by others
31.15.1 In performing the review, it may be necessary for the practitioner to use work
performed by other practitioners, or the work of an individual or organisation possessing
expertise in a field other than accounting or assurance. If the practitioner uses work performed
by another practitioner or an expert in the course of performing the review, the practitioner
shall take appropriate steps to be satisfied that the work performed is adequate for the
practitioner’s purposes.
31.16 Reconciling the Financial Statements to the Underlying Accounting Records
31.16.1 The practitioner shall obtain evidence that the financial statements agree with, or
reconcile to, the entity’s underlying accounting records.
31.16.2 The practitioner ordinarily obtains evidence that the financial statements agree with, or
reconcile to, the underlying accounting records by tracing the financial statement amounts and
balances to the relevant accounting records such as the general ledger, or to a summary
record or schedule that reflects the agreement or reconciliation of the financial statement
amounts with the underlying accounting records (such as a trial balance).
31.17 Additional Procedures When the Practitioner Becomes Aware that the Financial
Statements May Be Materially Misstated
31.17.1 If the practitioner becomes aware of a matter(s) that causes the practitioner to believe
the financial statements may be materially misstated, the practitioner shall design and perform
additional procedures sufficient to enable the practitioner to:
(a) Conclude that the matter(s) is not likely to cause the financial statements as a whole to be
materially misstated; or
(b) Determine that the matter(s) causes the financial statements as a whole to be materially
misstated.
31.17.2 Additional procedures are required under ISRE 2400 if the practitioner becomes aware
of a matter that causes the practitioner to believe the financial statements may be materially
misstated.
31.17.3 The practitioner’s response in undertaking additional procedures with respect to an
item the practitioner has cause to believe may be materially misstated in the financial
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statements will vary, depending on the circumstances, and is a matter for the practitioner’s
professional judgement.
31.17.4 The practitioner’s judgement about the nature, timing and extent of additional
procedures that are needed to obtain evidence to either conclude that a material misstatement
is not likely, or determine that a material misstatement exists, is guided by:
Information obtained from the practitioner’s evaluation of the results of the procedures
already performed;
The practitioner’s updated understanding of the entity and its environment obtained
throughout the course of the engagement; and
The practitioner’s view on the persuasiveness of evidence needed to address the matter
that causes the practitioner to believe that the financial statements may be materially
misstated.
31.17.5 Additional procedures focus on obtaining sufficient appropriate evidence to enable the
practitioner to form a conclusion on matters that the practitioner believes may cause the
financial statements to be materially misstated. The procedures may be:
Additional enquiry or analytical procedures, for example, being performed in greater
detail or being focused on the affected items (i.e. amounts or disclosures concerning the
affected accounts or transactions as reflected in the financial statements); or
Other types of procedures, for example, substantive test of details or external
confirmations.
31.17.6 The following example illustrates the practitioner’s evaluation of the need to perform
additional procedures, and the practitioner’s response when the practitioner believes additional
procedures are necessary.
In the course of performing the enquiry and analytical procedures for the review, the
practitioner’s analysis of accounts receivable shows a material amount of past due
accounts receivable, for which there is no allowance for bad or doubtful debts.
This causes the practitioner to believe that the accounts receivable balance in the
financial statements may be materially misstated. The practitioner then enquires of
management whether there are uncollectible accounts receivable that would need to be
shown as being impaired.
Depending on management’s response, the practitioner’s evaluation of the response
may:
(a) Enable the practitioner to conclude that the accounts receivable balance is not
likely to be materially misstated. In that case, no further procedures are required.
(b) Enable the practitioner to determine that the matter causes the financial
statements to be materially misstated. No further procedures are required, and
the practitioner would form the conclusion that the financial statements as a
whole are materially misstated.
(c) Lead the practitioner to continue to believe that the accounts receivable balance
is likely to be materially misstated, while not providing sufficient appropriate
evidence for the practitioner to determine that they are in fact misstated. In that
case, the practitioner is required to perform additional procedures, for example,
requesting from management an analysis of amounts received for those
accounts after the balance sheet date to identify uncollectible accounts
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receivable. The evaluation of the results of the additional procedures may enable
the practitioner to get to (a) or (b) above. If not, the practitioner is required to:
(i) Continue performing additional procedures until the practitioner reaches
either (a) or (b) above; or
(ii) If the practitioner is not able to either conclude that the matter is not
likely to cause the financial statements as a whole to be materially
misstated, or to determine that the matter does cause the financial
statements as a whole to be materially misstated, then a scope limitation
exists and the practitioner is not able to form an unmodified conclusion on
the financial statements.
31.18 Subsequent events
31.18.1 If the practitioner becomes aware of events occurring between the date of the financial
statements and the date of the practitioner’s report that require adjustment of, or disclosure in,
the financial statements, the practitioner shall request management to correct those
misstatements.
31.18.2 The practitioner has no obligation to perform any procedures regarding the financial
statements after the date of the practitioner’s report. However, if, after the date of the
practitioner’s report but before the date the financial statements are issued, a fact becomes
known to the practitioner that, had it been known to the practitioner at the date of the
practitioner’s report, may have caused the practitioner to amend the report, the practitioner
shall:
(a) Discuss the matter with management or those charged with governance, as appropriate;
(b) Determine whether the financial statements need amendment; and
(c) If so, enquire how management intends to address the matter in the financial statements.
31.18.3 If management does not amend the financial statements in circumstances where the
practitioner believes they need to be amended, and the practitioner’s report has already been
provided to the entity, the practitioner shall notify management and those charged with
governance not to issue the financial statements to third parties before the necessary
amendments have been made. If the financial statements are nevertheless subsequently
issued without the necessary amendments, the practitioner shall take appropriate action to
seek to prevent reliance on the practitioner’s report.
31.18.4 ISRE 2410 requires an auditor to enquire whether management has identified all
events up to the date of the review report that may require adjustments to or disclosure in the
interim financial information.
31.19 Comparatives – First interim report
31.19.1 When comparative information is included for the first time in interim financial
information, an auditor shall perform similar procedures on the comparative information as
applied to the current period interim financial information.
31.19.2 Refer to chapter 14 of the Manual and ISA 510 Initial Audit Engagements – Opening
Balances.
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31.20 Evaluation of misstatements
31.20.1 Misstatements need to be evaluated, both individually and in the aggregate, as to
whether these uncorrected misstatements are material to the interim financial information.
31.21 Management representations
31.21.1 The practitioner shall request management to provide a written representation that
management has fulfilled its responsibilities described in the agreed terms of engagement. The
written representation shall include that:
(a) Management has fulfilled its responsibility for the preparation of financial statements in
accordance with the applicable financial reporting framework, including where relevant their
fair presentation, and has provided the practitioner with all relevant information and access to
information as agreed in the terms of the engagement; and
(b) All transactions have been recorded and are reflected in the financial statements. If law or
regulation requires management to make written public statements about its responsibilities,
and the practitioner determines that such statements provide some or all of the representations
required by subparagraphs (a)–(b), the relevant matters covered by such statements need not
be included in the written representation.
31.21.2 The practitioner shall also request management’s written representations that
management has disclosed to the practitioner:
(a) The identity of the entity’s related parties and all the related party relationships and
transactions of which management is aware;
(b) Significant facts relating to any frauds or suspected frauds known to management that may
have affected the entity;
(c) Known actual or possible non-compliance with laws and regulations for which the effects of
non-compliance affect the entity’s financial statements;
(d) All information relevant to use of the going concern assumption in the financial statements;
(e) That all events occurring subsequent to the date of the financial statements and for which
the applicable financial reporting framework requires adjustment or disclosure, have been
adjusted or disclosed;
(f) Material commitments, contractual obligations or contingencies that have affected or may
affect the entity’s financial statements, including disclosures; and
(g) Material non-monetary transactions or transactions for no consideration undertaken by the
entity in the financial reporting period under consideration.
31.21.3 If management does not provide one or more of the requested written representations,
the practitioner shall:
(a) Discuss the matter with management and those charged with governance, as appropriate;
(b) Re-evaluate the integrity of management, and evaluate the effect that this may have on the
reliability of representations (oral or written) and evidence in general; and
(c) Take appropriate actions, including determining the possible effect on the conclusion in the
practitioner’s report in accordance with ISRE 2400.
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31.21.4 The practitioner shall disclaim a conclusion on the financial statements, or withdraw
from the engagement if withdrawal is possible under applicable law or regulation, as
appropriate, if:
(a) The practitioner concludes that there is sufficient doubt about the integrity of management
such that the written representations are not reliable; or
(b) Management does not provide the required representations required above.
31.21.5 The date of the written representations shall be as near as practicable to, but not after,
the date of the practitioner’s report. The written representations shall be for all financial
statements and period(s) referred to in the practitioner’s report.
31.21.6 Written representations are an important source of evidence in a review engagement.
If management modifies or does not provide the requested written representations, it may alert
the practitioner to the possibility that one or more significant issues may exist. Further, a
request for written, rather than oral, representations in many cases may prompt management
to consider such matters more rigorously, thereby enhancing the quality of the representations.
31.21.7 In addition to the written representations required under ISRE 2400, the practitioner
may consider it necessary to request other written representations about the financial
statements. These may be needed, for example, to complete the practitioner’s evidence with
respect to certain items or disclosures reflected in the financial statements where the
practitioner considers such representations to be important in forming a conclusion on the
financial statements on either a modified or unmodified basis.
31.21.8 In some cases, management may include in the written representations qualifying
language to the effect that representations are made to the best of management’s knowledge
and belief. It is reasonable for the practitioner to accept such wording if the practitioner is
satisfied that the representations are being made by those with appropriate responsibilities and
knowledge of the matters included in the representations.
31.21.9 Refer to chapter 22 of the Manual and ISA 580 Written Representations for further
commentary.
31.22 Evaluating Evidence Obtained from the Procedures Performed
31.22.1 The practitioner shall evaluate whether sufficient appropriate evidence has been
obtained from the procedures performed and, if not, the practitioner shall perform other
procedures judged by the practitioner to be necessary in the circumstances to be able to form
a conclusion on the financial statements.
31.22.2 If the practitioner is not able to obtain sufficient appropriate evidence to form a
conclusion, the practitioner shall discuss with management and those charged with
governance, as appropriate, the effects such limitations have on the scope of the review.
31.22.3 The practitioner shall evaluate the evidence obtained from the procedures performed
to determine the effect on the practitioner’s report.
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31.22.4 In some circumstances, the practitioner may not have obtained the evidence that the
practitioner had expected to obtain through the design of primarily enquiry and analytical
procedures and procedures addressing specific circumstances. In these circumstances, the
practitioner considers that the evidence obtained from the procedures performed is not
sufficient and appropriate to be able to form a conclusion on the financial statements. The
practitioner may:
Extend the work performed; or
Perform other procedures judged by the practitioner to be necessary in the
circumstances.
Where neither of these is practicable in the circumstances, the practitioner will not be able to
obtain sufficient appropriate evidence to be able to form a conclusion and is required by ISRE
2400 to determine the effect on the practitioner’s report, or on the practitioner’s ability to
complete the engagement, for example, if a member of management is unavailable at the
time of the review to respond to the practitioner's enquiries on significant matters. This
situation may arise even though the practitioner has not become aware of a matter(s) that
causes the practitioner to believe the financial statements may be materially misstated.
31.23 Forming the Practitioner’s Conclusion on the Financial Statements
31.23.1 In forming the conclusion on the financial statements, the practitioner shall:
(a) Evaluate whether the financial statements adequately refer to or describe the applicable
financial reporting framework;
(b) Consider whether, in the context of the requirements of the applicable financial reporting
framework and the results of procedures performed:
(i) The terminology used in the financial statements, including the title of each financial
statement, is appropriate;
(ii) The financial statements adequately disclose the significant accounting policies
selected and applied;
(iii) The accounting policies selected and applied are consistent with the applicable
financial reporting framework and are appropriate;
(iv) Accounting estimates made by management appear reasonable;
(v) The information presented in the financial statements appears relevant, reliable,
comparable, and understandable; and
(vi) The financial statements provide adequate disclosures to enable the intended users
to understand the effects of material transactions and events on the information
conveyed in the
financial statements.
31.23.2 The practitioner shall consider the impact of:
(a) Uncorrected misstatements identified during the review, and in the previous year’s review
of the entity’s financial statements, on the financial statements as a whole; and
(b) Qualitative aspects of the entity’s accounting practices, including indicators of possible bias
in management’s judgements.
31.23.3 If the financial statements are prepared using a fair presentation framework, the
practitioner’s consideration shall also include:
(a) The overall presentation, structure and content of the financial statements in accordance
with the applicable framework; and
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(b) Whether the financial statements, including the related notes, appear to represent the
underlying transactions and events in a manner that achieves fair presentation or gives a true
and fair view, as appropriate, in the context of the financial statements as a whole.
31.23.4 The practitioner’s conclusion on the financial statements, whether unmodified or
modified, shall be expressed in the appropriate form in the context of the financial reporting
framework applied in the financial statements.
31.23.5 The description of the applicable financial reporting framework in the financial
statements is important because it advises users of the financial statements of the framework
on which the financial statements are based. If the financial statements are special purpose
financial statements, they may be prepared under a special purpose financial reporting
framework that is available only to the engaging party and the practitioner. Description of the
special purpose financial reporting framework used is important as the special purpose
financial statements may not be appropriate for any use other than the intended use identified
for the special purpose financial statements.
31.23.6 A description of the applicable financial reporting framework that contains imprecise
qualifying or limiting language (for example, “the financial statements are in substantial
compliance with International Financial Reporting Standards”) is not an adequate description
of that framework as it may mislead users of the financial statements.
31.23.7 The practitioner is required under ISRE 2400 to evaluate whether the financial
statements provide adequate disclosures to enable the intended users to understand the effect
of material transactions and events on the entity’s financial position, financial performance and
cash flows.
31.23.8 In the case of financial statements prepared in accordance with the requirements of a
fair presentation framework, management may need to include additional disclosures in the
financial statements beyond those specifically required by the applicable financial reporting
framework or, in extremely rare circumstances, to depart from a requirement in the framework,
in order to achieve the fair presentation of the financial statements.
31.23.9 It will be extremely rare for the practitioner to consider financial statements prepared in
accordance with a compliance framework to be misleading if, in accordance with ISRE 2400,
the practitioner has determined at the time of engagement acceptance that the framework is
acceptable.
31.23.10 In considering the qualitative aspects of the entity’s accounting practices, the
practitioner may become aware of possible bias in management’s judgements. The practitioner
may conclude that the cumulative effect of a lack of neutrality, together with the effect of
apparent uncorrected misstatements, causes the financial statements as a whole to be
materially misstated. Indicators of a lack of neutrality that may affect the practitioner’s
evaluation of whether the financial statements as a whole may be materially misstated include
the following:
The selective correction of apparent misstatements brought to management’s attention
during the review (for example, correcting misstatements with the effect of increasing
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reported earnings, but not correcting misstatements that have the effect of decreasing
reported earnings).
Possible management bias in the making of accounting estimates.
31.23.11 Indicators of possible management bias do not necessarily mean there are
misstatements for purposes of drawing conclusions on the reasonableness of individual
accounting estimates. They may, however, affect the practitioner’s consideration of whether
the financial statements as a whole may be materially misstated.
31.24 Auditor’s responsibility for accompanying information
31.24.1 Information that accompanies the interim financial information needs to be reviewed,
to consider whether such information is materially inconsistent with the interim financial
information.
31.25 Communication
31.25.1 When a matter comes to the auditor’s attention that causes the auditor to believe that
it is necessary to make a material adjustment to the interim financial information, the auditor
shall communicate this matter as soon as practicable to the appropriate level of management.
31.25.2 When a matter comes to the auditor’s attention that causes the auditor to believe in
the existence of fraud or non-compliance by the entity with laws and regulations the auditor
shall communicate the matter as soon as practicable to those charged with governance and
shall consider the implications for the review.
31.25.3 The auditor shall communicate relevant matters of governance interest arising from
the review of the interim financial report to those charged with governance.
Reporting the nature, extent and results of the review of financial information
31.26 Unmodified Conclusion
31.26.1 The practitioner shall express an unmodified conclusion in the practitioner’s report on
the financial statements as a whole when the practitioner has obtained limited assurance to be
able to conclude that nothing has come to the practitioner’s attention that causes the
practitioner to believe that the financial statements are not prepared, in all material respects, in
accordance with the applicable financial reporting framework.
31.26.2 When the practitioner expresses an unmodified conclusion, the practitioner shall,
unless otherwise required by law or regulation, use one of the following phrases, as
appropriate:
(a) “Based on our review, nothing has come to our attention that causes us to believe that the
financial statements do not present fairly, in all material respects (or do not give a true and fair
view), in accordance with the applicable financial reporting framework,” (for financial
statements prepared using a fair presentation framework); or
(b) “Based on our review, nothing has come to our attention that causes us to believe that the
financial statements are not prepared, in all material respects, in accordance with the
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applicable financial reporting framework,” (for financial statements prepared using a
compliance framework).
31.26.3 In the case of financial statements prepared in accordance with a fair presentation
framework, the practitioner’s conclusion states that nothing has come to the practitioner’s
attention that causes the practitioner to believe that the financial statements do not present
fairly, in all material respects, (or do not give a true and fair view of ) in accordance with
[the applicable fair presentation framework]. In the case of many general purpose frameworks,
for example, the financial statements are required to fairly present (or give a true and fair view
of) the financial position of the entity as at the end of a period, and the entity’s financial
performance and cash flows for that period.
31.26.4 Whether the phrase “present fairly, in all material respects,” or the phrase “gives a true
and fair view” is used in any particular jurisdiction is determined by the law or regulation
governing the review of financial statements in that jurisdiction, or by generally accepted
practice in that jurisdiction. Where law or regulation requires the use of different wording, this
does not affect the requirement in the ISRE for the practitioner to evaluate the fair presentation
of financial statements prepared in accordance with a fair presentation framework.
31.27 Modified Conclusion
31.27.1 The practitioner shall express a modified conclusion in the practitioner’s report on the
financial statements as a whole when:
(a) The practitioner determines, based on the procedures performed and the evidence
obtained, that the financial statements are materially misstated; or
(b) The practitioner is unable to obtain sufficient appropriate evidence in relation to one or
more items in the financial statements that are material in relation to the financial statements
as a whole.
31.27.2 When the practitioner modifies the conclusion expressed on the financial statements,
the practitioner shall:
(a) Use the heading “Qualified Conclusion,” “Adverse Conclusion” or “Disclaimer of
Conclusion,” as appropriate, for the conclusion paragraph in the practitioner’s report; and
(b) Provide a description of the matter giving rise to the modification, under an appropriate
heading (for example, “Basis for Qualified Conclusion,” “Basis for Adverse Conclusion” or
“Basis for Disclaimer of Conclusion,” as appropriate), in a separate paragraph in the
practitioner’s report immediately before the conclusion paragraph (referred to as the basis for
conclusion paragraph).
31.28 Financial statements are materially misstated
31.28.1 If the practitioner determines that the financial statements are materially misstated, the
practitioner shall express:
(a) A qualified conclusion, when the practitioner concludes that the effects of the matter(s)
giving rise to the modification are material, but not pervasive to the financial statements; or
(b) An adverse conclusion, when the effects of the matter(s) giving rise to the modification are
both material and pervasive to the financial statements.
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31.28.2 When the practitioner expresses a qualified conclusion on the financial statements
because of a material misstatement, the practitioner shall, unless otherwise required by law or
regulation, use one of the following phrases, as appropriate:
(a) “Based on our review, except for the effects of the matter(s) described in the Basis for
Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe
that the financial statements do not present fairly, in all material respects (or do not give a true
and fair view), in accordance with the applicable financial reporting framework,” (for financial
statements prepared using a fair presentation framework); or
(b) “Based on our review, except for the effects of the matter(s) described in the Basis for
Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe
that the financial statements are not prepared, in all material respects, in accordance with the
applicable financial reporting framework,” (for financial statements prepared using a
compliance framework).
31.28.3 When the practitioner expresses an adverse conclusion on the financial statements,
the practitioner shall, unless otherwise required by law or regulation, use one of the following
phrases, as appropriate:
(a) “Based on our review, due to the significance of the matter(s) described in the Basis for
Adverse Conclusion paragraph, the financial statements do not present fairly, in all material
respects (or do not give a true and fair view), in accordance with the applicable financial
reporting framework,” (for financial statements prepared using a fair presentation
framework); or
(b) “Based on our review, due to the significance of the matter(s) described in the Basis for
Adverse Conclusion paragraph, the financial statements are not prepared, in all material
respects, in accordance with the applicable financial reporting framework,” (for financial
statements prepared using a compliance framework).
31.28.4 In the basis for conclusion paragraph, in relation to material misstatements that give
rise to either a qualified conclusion or an adverse conclusion, the practitioner shall:
(a) Describe and quantify the financial effects of the misstatement if the material misstatement
relates to specific amounts in the financial statements (including quantitative disclosures),
unless impracticable, in which case the practitioner shall so state;
(b) Explain how disclosures are misstated if the material misstatement relates to narrative
disclosures; or
(c) Describe the nature of omitted information if the material misstatement relates to the non-
disclosure of information required to be disclosed. Unless prohibited by law or regulation, the
practitioner shall include the omitted disclosures where practicable to do so.
31.29 Inability to obtain sufficient appropriate evidence
31.29.1 If the practitioner is unable to form a conclusion on the financial statements due to
inability to obtain sufficient appropriate evidence, the practitioner shall:
(a) Express a qualified conclusion if the practitioner concludes that the possible effects on the
financial statements of undetected misstatements, if any, could be material but not pervasive;
or
(b) Disclaim a conclusion if the practitioner concludes that the possible effects on the financial
statements of undetected misstatements, if any, could be both material and pervasive.
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31.29.2 The practitioner shall withdraw from the engagement if the following conditions are
present:
(a) Due to a limitation on the scope of the review imposed by management after the
practitioner has accepted the engagement, the practitioner is unable to obtain sufficient
appropriate evidence to form a conclusion on the financial statements;
(b) The practitioner has determined that the possible effects on the financial statements of
undetected misstatements are material and pervasive; and
(c) Withdrawal is possible under applicable law or regulation.
31.29.3 When the practitioner expresses a qualified conclusion on the financial statements due
to inability to obtain sufficient appropriate evidence, the practitioner shall, unless otherwise
required by law or regulation, use one of the following phrases, as appropriate:
(a) “Based on our review, except for the possible effects of the matter(s) described in the Basis
for Qualified Conclusion paragraph, nothing has come to our attention that causes us to
believe that the financial statements do not present fairly, in all material respects (or do not
give a true and fair view), in accordance with the applicable financial reporting framework,”
(for financial statements prepared using a fair presentation framework); or
(b) “Based on our review, except for the possible effects of the matter(s) described in the Basis
for Qualified Conclusion paragraph, nothing has come to our attention that causes us to
believe that the financial statements are not prepared, in all material respects, in accordance
with the applicable financial reporting framework,” (for financial statements prepared using a
compliance framework).
31.29.4 When disclaiming a conclusion on the financial statements the practitioner shall state
in the conclusion paragraph that:
(a) Due to the significance of the matter(s) described in the Basis for Disclaimer of Conclusion
paragraph, the practitioner is unable to obtain sufficient appropriate evidence to form a
conclusion on the financial statements; and
(b) Accordingly, the practitioner does not express a conclusion on the financial statements.
31.29.5 In the basis for conclusion paragraph, in relation to either the qualified conclusion due
to inability to obtain sufficient appropriate evidence or when the practitioner disclaims a
conclusion, the practitioner shall include the reason(s) for the inability to obtain sufficient
appropriate evidence.
31.29.6 Inability to perform a specific procedure does not constitute a limitation on the scope of
the review if the practitioner is able to obtain sufficient appropriate evidence by performing
other procedures.
31.29.7 Limitations on the scope of the review imposed by management may have other
implications for the review, such as for the practitioner’s consideration of areas where the
financial statements are likely to be materially misstated, and engagement continuance.
31.29.8 The practicality of withdrawing from the engagement may depend on the stage of
completion of the engagement at the time that management imposes the scope limitation. If
the practitioner has substantially completed the review, the practitioner may decide to
complete the review to the extent possible, disclaim a conclusion and explain the scope
limitation in the paragraph in the report that describes the basis for disclaiming a conclusion.
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31.29.9 In certain circumstances, withdrawal from the engagement may not be possible if the
practitioner is required by law or regulation to continue the engagement. For example, this may
be the case for a practitioner appointed to review the financial statements of a public sector
entity. It may also be the case in jurisdictions where the practitioner is appointed to review the
financial statements covering a specific period, or appointed for a specific period, and is
prohibited from withdrawing before the completion of the review of those financial statements
or before the end of that period, respectively. The practitioner may also consider it necessary
to include an Other Matter paragraph in the practitioner’s report to explain why it is not possible
for the practitioner to withdraw from the engagement.
31.29.10 When the practitioner concludes that withdrawal from the engagement is necessary
because of a scope limitation, there may be a professional, legal or regulatory requirement for
the practitioner to communicate matters relating to the withdrawal from the engagement to
regulators or the entity’s owners.
31.30 The Practitioner’s Report
31.30.1 The practitioner’s report for the review engagement shall be in writing, and shall
contain the following elements:
(a) A title, which shall clearly indicate that it is the report of an independent practitioner for a
review engagement;
(b) The addressee(s), as required by the circumstances of the engagement;
(c) An introductory paragraph that:
(i) Identifies the financial statements reviewed, including identification of the title of each
of the statements contained in the set of financial statements and the date and period
covered
by each financial statement;
(ii) Refers to the summary of significant accounting policies and other explanatory
information; and
(iii) States that the financial statements have been reviewed;
(d) A description of the responsibility of management for the preparation of the financial
statements, including an explanation that management is responsible for:
(i) Their preparation in accordance with the applicable financial reporting framework
including, where relevant, their fair presentation;
(ii) Such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due
to fraud or error;
(e) If the financial statements are special purpose financial statements:
(i) A description of the purpose for which the financial statements are prepared and, if
necessary, the intended users, or reference to a note in the special purpose financial
statements that contains that information; and
(ii) If management has a choice of financial reporting frameworks in the preparation of
such financial statements, a reference within the explanation of management’s
responsibility for the financial statements to management’s responsibility for determining
that the applicable financial reporting framework is acceptable in the circumstances;
(f) A description of the practitioner’s responsibility to express a conclusion on the financial
statements including reference to the ISRE and, where relevant, applicable law or regulation;
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(g) A description of a review of financial statements and its limitations, and the following
statements:
(i) A review engagement under the ISRE is a limited assurance engagement;
(ii) The practitioner performs procedures, primarily consisting of making enquiries of
management and others within the entity, as appropriate, and applying analytical
procedures, and evaluates the evidence obtained; and
(iii) The procedures performed in a review are substantially less than those performed in
an audit conducted in accordance with International Standards on Auditing (ISAs), and,
accordingly, the practitioner does not express an audit opinion on the financial
statements;
(h) A paragraph under the heading “Conclusion” that contains:
(i) The practitioner’s conclusion on the financial statements as a whole in accordance with
paragraphs 72–85, as appropriate; and
(ii) A reference to the applicable financial reporting framework used to prepare the
financial statements, including identification of the jurisdiction of origin of the financial
reporting framework that is not International Financial Reporting Standards or
International Financial Reporting Standard for Small and Medium-sized Entities issued by
the International Accounting Standards Board, or International Public Sector Accounting
Standards issued by the International Public Sector Accounting Standards Board;
(i) When the practitioner’s conclusion on the financial statements is modified:
(i) A paragraph under the appropriate heading that contains the practitioner’s modified
conclusion in accordance with paragraphs 72 and 75–85, as appropriate; and (ii) A
paragraph, under an appropriate heading, that provides a description of the matter(s)
giving rise to the modification;
(j) A reference to the practitioner’s obligation under this ISRE to comply with relevant ethical
requirements;
(k) The date of the practitioner’s report;
(l) The practitioner’s signature; and
(m) The location in the jurisdiction where the practitioner practices.
31.30.2 The written report encompasses reports issued in hard copy format and those using
an electronic medium.
31.30.3 A title indicating the report is the report of an independent practitioner, for example,
“Independent Practitioner’s Review Report,” affirms that the practitioner has met all of the
relevant ethical requirements regarding independence and, therefore, distinguishes the
independent practitioner’s report from reports issued by others.
31.30.4 Law or regulation may specify to whom the practitioner’s report is to be addressed in
that particular jurisdiction. The practitioner’s report is normally addressed to those for whom
the report is prepared, often either to the shareholders or to those charged with governance of
the entity whose financial statements are being reviewed.
31.30.5 When the practitioner is aware that the financial statements that have been reviewed
will be included in a document that contains other information, such as a financial report, the
practitioner may consider, if the form of presentation allows, identifying the page numbers on
which the financial statements that have been reviewed are presented. This helps users to
identify the financial statements to which the practitioner’s report relates.
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31.30.6 The requirement of ISRE 2400 that the practitioner must obtain management’s
agreement that it acknowledges and understands its responsibilities, both in relation to the
preparation of the financial statements and in relation to the review engagement, is
fundamental to performing the review and reporting on the engagement. The description of
management’s responsibilities in the practitioner’s report provides context for readers of the
practitioner’s report about management’s responsibilities, as they relate to the review
engagement performed.
31.30.7 The practitioner’s report need not refer specifically to “management” but instead may
use the term that is appropriate in the context of the legal framework in the particular
jurisdiction. In some jurisdictions, the appropriate reference is to those charged with
governance of the entity.
31.30.8 There may be circumstances when it is appropriate for the practitioner to add to the
description of management’s responsibilities as described in ISRE 2400 to reflect additional
responsibilities that are relevant to the preparation of the financial statements in the context of
a jurisdiction, or due to the type of entity.
31.30.9 In some jurisdictions, law or regulation prescribing management’s responsibilities may
specifically refer to a responsibility for the adequacy of the accounting books and records, or
accounting system. As books, records and systems are an integral part of internal control,
ISRE 2400 does not use these descriptions or make any specific reference to them.
31.30.10 The practitioner’s report states that the practitioner’s responsibility is to express a
conclusion on the financial statements based on the review performed, in order to contrast the
practitioner’s responsibility with management’s responsibility for preparation of the financial
statements.
31.30.11 The reference to the standards used by the practitioner for the review conveys to the
users of the practitioner’s report that the review has been conducted in accordance with
established standards.
31.30.12 The description of the nature of a review engagement in the practitioner’s report
explains the scope and limitations of the engagement undertaken for the benefit of the readers
of the report. This explanation clarifies, for avoidance of doubt, that the review is not an audit
and that accordingly, the practitioner does not express an audit opinion on the financial
statements.
31.30.13 The identification of the applicable financial reporting framework in the practitioner’s
conclusion is intended to advise users of the practitioner’s report of the context in which that
conclusion is expressed. It is not intended to limit the evaluation required in paragraph 30(a) of
ISRE 2400. The applicable financial reporting framework is identified in such terms as:
“ in accordance with International Financial Reporting Standards;” or
“ in accordance with accounting principles generally accepted in Jurisdiction X ”
31.30.14 When the applicable financial reporting framework encompasses financial reporting
standards and legal or regulatory requirements, the framework is identified in such terms as
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“ in accordance with International Financial Reporting Standards and the requirements of
Jurisdiction X Corporations Act.”
31.30.15 An adverse conclusion or a disclaimer of conclusion relating to a specific matter
described in the basis for modification paragraph does not justify the omission of a description
of other identified matters that would have otherwise required a modification of the
practitioner’s conclusion. In such cases, the disclosure of such other matters of which the
practitioner is aware may be relevant to users of the financial statements.
31.30.16 The practitioner’s signature is either in the name of the practitioner’s firm, the
personal name of the individual practitioner, or both, as appropriate for the particular
jurisdiction. In addition to the practitioner’s signature, in certain jurisdictions, the practitioner
may be required to make a declaration in the practitioner’s report about professional
designations or recognition by the appropriate licensing authority in that jurisdiction.
31.30.17 The special purpose financial statements may be used for purposes other than those
for which they were intended. For example, a regulator may require certain entities to place the
special purpose financial statements on public record. For avoidance of misunderstanding, it is
important that the practitioner alert users of the practitioner’s report that the financial
statements are prepared in accordance with a special purpose framework and, therefore, may
not be suitable for another purpose.
31.30.18 In addition to the alert to the reader of the practitioner’s report that is required by
ISRE 2400 when the financial statements are prepared using a special purpose framework, the
practitioner may consider it appropriate to indicate that the practitioner’s report is intended
solely for the specific users. Depending on the law or regulation of the particular jurisdiction,
this may be achieved by restricting the distribution or use of the practitioner’s report. In these
circumstances, the paragraph containing the alert about the use of a special purpose
framework may be expanded to include these other matters, and the heading modified
accordingly.
31.30.19 In some jurisdictions, the practitioner may have additional responsibilities to report on
other matters that are supplementary to the practitioner’s responsibility under ISRE 2400. For
example, the practitioner may be asked to report certain matters if they come to the
practitioner’s attention during the course of the review of the financial statements. Alternatively,
the practitioner may be asked to perform and report on additional specified procedures, or to
express a conclusion on specific matters, such as the adequacy of accounting books and
records. Standards on engagements to review financial statements in the specific jurisdiction
may provide guidance on the practitioner’s responsibilities with respect to specific additional
reporting responsibilities in that jurisdiction.
31.30.20 In some cases, the relevant law or regulation may require or permit the practitioner to
report on these other responsibilities within the practitioner’s report on the financial statements.
In other cases, the practitioner may be required or permitted to report on them in a separate
report.
31.30.21 These other reporting responsibilities are addressed in a separate section of the
practitioner’s report, to clearly distinguish them from the practitioner’s responsibility under
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ISRE 2400 to report on the financial statements. Where relevant, this section may contain sub-
heading(s) that describe(s) the content of the other reporting responsibility paragraph(s). In
some jurisdictions, the additional reporting responsibilities may be addressed in a report that is
separate from the practitioner’s report provided for the review of the financial statements.
31.30.22 Consistency in the practitioner’s report, when the review has been conducted in
accordance with ISRE 2400, promotes credibility in the global marketplace by making more
readily identifiable those reviews of financial statements that have been conducted in
accordance with globally recognized standards. The practitioner’s report may refer to ISRE
2400 when the differences between the legal or regulatory requirements and ISRE 2400 relate
only to the layout or wording of the practitioner’s report and, at a minimum, the report complies
with the requirements of paragraph 86 of ISRE 2400. Accordingly, in such circumstances the
practitioner is considered to have complied with the requirements of ISRE 2400, even when
the layout and wording used in the practitioner’s report are specified by legal or regulatory
reporting requirements. Where specific requirements in a particular jurisdiction do not conflict
with ISRE 2400, adoption of the layout and wording used in ISRE 2400 assists users of the
practitioner’s report to more readily recognize the practitioner’s report as a report on a review
of financial statements conducted in accordance with ISRE 2400. Circumstances where law or
regulation prescribes the layout or wording of the practitioner’s report in terms that are
significantly different from the requirements of ISRE 2400 are addressed in the requirements of
ISRE 2400 concerning acceptance of review engagements and continuance of client
relationships.
31.30.23 When, in addition to complying with the requirements of ISRE 2400, the practitioner
also complies with relevant national standards, the report may refer to the review having been
performed in accordance with both ISRE 2400 and relevant national standards for
engagements to review financial statements. However, a reference to both ISRE 2400 and
relevant national standards is not appropriate if there is a conflict between the requirements of
ISRE 2400 and those in the relevant national standards that would lead the practitioner to form
a different conclusion or not to include an Emphasis of Matter paragraph that, in the particular
circumstances, would be required by ISRE 2400. In such a case, the practitioner’s report refers
only to the relevant standards (either ISRE 2400 or the relevant national standards) in
accordance with which the practitioner’s report has been prepared.
31.31 Emphasis of Matter Paragraphs
31.31.1 The practitioner may consider it necessary to draw users’ attention to a matter
presented or disclosed in the financial statements that, in the practitioner’s judgement, is of
such importance that it is fundamental to users’ understanding of the financial statements. In
such cases, the practitioner shall include an Emphasis of Matter paragraph in the practitioner’s
report, provided the practitioner has obtained sufficient appropriate evidence to conclude that
the matter is not likely to be materially misstated as presented in the financial statements.
Such paragraph shall refer only to information presented or disclosed in the financial
statements.
31.31.2 The practitioner’s report on special purpose financial statements shall include an
Emphasis of Matter paragraph alerting users of the practitioner’s report that the financial
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statements are prepared in accordance with a special purpose framework and that, as a result,
the financial statements may not be suitable for another purpose.
31.31.3 The practitioner shall include an Emphasis of Matter paragraph immediately after the
paragraph that contains the practitioner’s conclusion on the financial statements under the
heading “Emphasis of Matter,” or other appropriate heading.
31.32 Other Matter Paragraphs
31.32.1 If the practitioner considers it necessary to communicate a matter other than those that
are presented or disclosed in the financial statements that, in the practitioner’s judgement, is
relevant to users’ understanding of the review, the practitioner’s responsibilities or the
practitioner’s report and this is not prohibited by law or regulation, the practitioner shall do so in
a paragraph in the practitioner’s report with the heading “Other Matter” or other appropriate
heading.
31.33 Other Reporting Responsibilities
31.33.1 A practitioner may be requested to address other reporting responsibilities in the
practitioner’s report on the financial statements that are in addition to the practitioner’s
responsibilities under this ISRE to report on the financial statements. In such situations, those
other reporting responsibilities shall be addressed by the practitioner in a separate section in
the practitioner’s report headed “Report on Other Legal and Regulatory Requirements,” or
otherwise as appropriate to the content of the section, following the section of the report
headed “Report on the Financial Statements.”
31.34 Date of the Practitioner’s Report
31.34.1 The practitioner shall date the report no earlier than the date on which the practitioner
has obtained sufficient appropriate evidence as the basis for the practitioner’s conclusion on
the financial statements, including being satisfied that:
(a) All the statements that comprise the financial statements under the applicable financial
reporting framework, including the related notes where applicable, have been prepared; and
(b) Those with the recognized authority have asserted that they have taken responsibility for
those financial statements.
31.34.2 The date of the practitioner’s report informs the user of the practitioner’s report that the
practitioner has considered the effect of events and transactions of which the practitioner
became aware and that occurred up to that date.
31.34.3 The practitioner’s conclusion is provided on the financial statements and the financial
statements are the responsibility of management. The practitioner is not in a position to
conclude that sufficient appropriate evidence has been obtained until the practitioner is
satisfied that all the statements that comprise the financial statements, including the related
notes, have been prepared and management has accepted responsibility for them.
31.34.3 In some jurisdictions, law or regulation identifies the individuals or bodies (for example,
the directors) that are responsible for concluding that all the statements that comprise the
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financial statements, including the related notes, have been prepared, and specifies the
necessary approval process. In such cases, evidence is obtained of that approval before
dating the report on the financial statements. In other jurisdictions, however, the approval
process is not prescribed in law or regulation. In such cases, the procedures the entity follows
in preparing and finalizing its financial statements in view of its management and governance
structures are considered in order to identify the individuals or body with the authority to
conclude that all the statements that comprise the financial statements, including the related
notes, have been prepared. In some cases, law or regulation may identify the point in the
financial statement reporting process at which the review is expected to be complete.
31.34.4 In some jurisdictions, final approval of the financial statements by shareholders is
required before the financial statements are issued publicly. In these jurisdictions, final
approval by shareholders is not necessary for the practitioner to conclude on the financial
statements. The date of approval of the financial statements for purposes of ISRE 2400 is the
earlier date on which those with the recognized authority determine that all the statements that
comprise the financial statements, including the related notes, have been prepared and that
those with the recognized authority have asserted that they have taken responsibility for them.
31.34.5 The auditor should issue a written report that contains the following:
An appropriate title clearly identifying it as a review report of the independent auditor of
the entity.
An addressee as required by the circumstances of the engagement.
Identification of the interim financial report reviewed including identification of the title of
each of the statements contained in the financial report and the date and period covered
by the financial information.
If the financial information comprises a complete set of general purpose financial
statements prepared in accordance with a financial reporting framework designed to
achieve fair presentation, a statement that those charged with governance are
responsible for the preparation and fair presentation of the interim financial report in
accordance with the applicable financial reporting framework.
In other circumstances, a statement that those charged with governance are responsible
for the preparation and presentation of the interim financial information in accordance
with the applicable financial reporting framework.
If the interim financial information comprises a complete set of general purpose financial
statements prepared in accordance with a financial reporting framework designed to
achieve fair presentation, a conclusion as to whether anything has come to the auditor’s
attention that causes the auditor to believe that the interim financial information does not
give a true and fair view, or does not present fairly, in all material respects, in accordance
with the applicable financial reporting framework (including a reference to the jurisdiction
or country of origin of the financial reporting framework when the financial reporting
framework used is not International Financial Reporting Standards).
A statement that the auditor is responsible for expressing a conclusion on the financial
information based on the review.
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A statement that the review of the financial information was conducted in accordance with
ISRE 2410 Review of Interim Financial information Performed by the Independent Auditor
of the Entity.
A statement that a review consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review
procedures.
A statement that a review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing and consequently does not enable
the auditor to obtain assurance that the auditor would become aware of all significant
matters that might be identified in an audit and that accordingly no audit opinion is
expressed.
A conclusion as to whether anything has come to the auditor’s attention that causes the
auditor to believe that the interim financial report does not present fairly, or if applicable,
is not true and fair, in all material respects, in accordance with the applicable financial
reporting framework.
The date of the auditor’s review report.
The location in the country or jurisdiction where the auditor practices.
The auditor’s signature.
31.35 Reporting - Going concern and significant uncertainties
31.35.1 If adequate disclosure is made in the interim financial report, the auditor shall add an
emphasis of matter paragraph to the review report to highlight a material uncertainty relating to
an event or condition that may cast significant doubt on the entity’s ability to continue as a
going concern.
31.35.2 If a material uncertainty that casts significant doubt about the entity’s ability to continue
as a going concern is not adequately disclosed in the interim financial information, the auditor
shall express a qualified or adverse conclusion, as appropriate. The report shall include
specific reference to the fact that there is such a material uncertainty.
31.35.3 The review report shall be modified by adding a paragraph to highlight a significant
uncertainty that is adequately disclosed in the interim financial report, that came to the
auditor’s attention, the resolution of which is dependent upon future events and which may
materially affect the interim financial report.
31.35.4 If a significant uncertainty is not adequately disclosed in the interim financial report, the
auditor shall express a qualified or adverse conclusion, as appropriate. The report shall
include specific reference to the fact that there is such a significant uncertainty.
31.35.5 Refer to chapter 21 of the Manual and ISA 570 Going Concern for further commentary
in relation to going concern.
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31.36 Documentation
31.36.1 The preparation of documentation for the review provides evidence that the review
was performed in accordance with ISRE 2400, and legal and regulatory requirements where
relevant, and a sufficient and appropriate record of the basis for the practitioner’s report. The
practitioner shall document the following aspects of the engagement in a timely manner,
sufficient to enable an experienced practitioner, having no previous connection with the
engagement, to understand:
(a) The nature, timing and extent of the procedures performed to comply with ISRE 2400 and
applicable legal and regulatory requirements;
(b) Results obtained from the procedures, and the practitioner’s conclusions formed on the
basis of those results; and
(c) Significant matters arising during the engagement, the practitioner’s conclusions reached
thereon, and significant professional judgements made in reaching those conclusions.
31.36.2 In documenting the nature, timing and extent of procedures performed as required in
ISRE 2400, the practitioner shall record:
(a) Who performed the work and the date such work was completed; and
(b) Who reviewed the work performed for the purpose of quality control for the engagement,
and the date and extent of the review.
31.36.3 The practitioner shall also document discussions with management, those charged
with governance, and others as relevant to the performance of the review of significant matters
arising during the engagement, including the nature of those matters.
31.36.4 If, in the course of the engagement, the practitioner identified information that is
inconsistent with the practitioner’s findings regarding significant matters affecting the financial
statements, the practitioner shall document how the inconsistency was addressed.
31.36.5 Review documentation should be prepared that is sufficient and appropriate to provide
a basis for the auditor’s conclusion and to provide evidence that the review was performed in
accordance with ISRE 2410 and applicable legal and regulatory requirements.
31.36.6 ISQC 1 requires the firm to establish time limits that reflect the need to complete the
assembly of final engagement files on a timely basis.
31.36.7 Refer to chapter 22.3 of the Manual for further commentary in relation to
documentation.
31.37 Review toolkit
31.37.1 The Audit Manual includes a series of documents to assist an auditor in conducting a
review of an entity. These documents should be tailored to the specific circumstance of the
client, and the engagement.
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31.38 Review of a financial report performed by an assurance practitioner who is not the
auditor of the entity
Introduction
31.38.1 ISRE 2400 (revised) has been issued to provide guidance to a practitioner who is not
the auditor of an entity who undertakes an engagement to review financial statements.
31.38.2 The requirements of ISRE 2400 (revised) should also be applied to engagements to
review other historical financial information.
Differences in procedures required
31.38.3 As auditor of an entity, a practitioner obtains information about the entity and its
environment, including its internal controls, and about its operations, financial systems,
personnel etc. A practitioner who is not the auditor of an entity will generally will not have that
information, and will need to obtain that information to conduct a review.
31.38.4 Such a practitioner should use the information in this manual for an auditor of an entity
performing a review of historical financial information, however certain audit programs and
checklists and other documents included in the toolkit for an auditor conducting the review
engagement should be replaced by the programs, checklists etc included in this manual for a
practitioner who is not the auditor conducting a review. These additional tools are designed to
assist a practitioner in obtaining the information about the entity and its environment, and its
operations etc., to enable the practitioner to conduct a review.
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Appendix I
Illustrative Engagement Letter for an Engagement to Review Historical Financial
Statements
The following is an example of an engagement letter for a review of general purpose financial
statements (prepared in accordance with International Financial Reporting Standards (IFRSs)),
which illustrates the relevant requirements and guidance contained in ISRE 2400. This letter is
not authoritative but is intended only to be a guide that may be used in conjunction with the
considerations outlined in ISRE 2400. It will need to be varied according to individual
requirements and circumstances. It is drafted to refer to the review of financial statements for a
single reporting period and would require adaptation if intended or expected to apply to
recurring reviews. It may be appropriate to seek legal advice that any proposed letter is
suitable.
To the appropriate representative of management or those charged with governance
of ABC Company:
[The objective and scope of the review]
You have requested that we review the general purpose financial statements of ABC
Company, which comprise the statement of financial position as at December 31, 20X1, and
the statement of comprehensive income, statement of changes in equity and cash flow
statement for the year then ended, and a summary of significant accounting policies and other
explanatory information. We are pleased to confirm our acceptance and our understanding of
this review engagement by means of this letter.
Our review will be conducted with the objective of expressing our conclusion on the financial
statements. Our conclusion, if unmodified, will be in the form “Based on our review, nothing
has come to our attention that causes us to believe that these financial statements do not
present fairly, in all material respects, (or do not give a true and fair view of) the financial
position of the company as at [date] and (of) its financial performance and cash flows for the
year then ended in accordance with International Financial Reporting Standards (IFRSs).”
[The practitioner’s responsibilities]
We will conduct our review in accordance with International Standard on Review Engagements
(ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400
(Revised) requires us to conclude whether anything has come to our attention that causes us
to believe that the financial statements, taken as a whole, are not prepared in all material
respects in accordance with the applicable financial reporting framework. ISRE 2400 also
requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with ISRE 2400 (Revised) is a limited
assurance engagement. We will perform procedures, primarily consisting of making enquiries
of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluate the evidence obtained. We will also perform additional procedures if
we become aware of matters that cause us to believe the financial statements as a whole may
be materially misstated. These procedures are performed to enable us to express our
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conclusion on the financial statements in accordance with ISRE 2400 (Revised). The
procedures selected will depend on what we consider necessary applying our professional
judgement, based on our understanding of ABC Company and its environment, and our
understanding of IFRSs and its application in the industry context.
A review is not an audit of the financial statements, therefore:
(a) There is a commensurate higher risk than there would be in an audit, that any material
misstatements that exist in the financial statements reviewed may not be revealed by the
review, even though the review is properly performed in accordance with ISRE 2400
(Revised).
(b) In expressing our conclusion from the review of the financial statements, our report on the
financial statements will expressly disclaim any audit opinion on the financial statements.
[The responsibilities of management and identification of the applicable financial reporting
framework (for purposes of this example, it is assumed that the practitioner has not determined
that the law or regulation prescribes those responsibilities in appropriate terms; the
descriptions in paragraph 30(b) of this ISRE are therefore used).]
Our review will be conducted on the basis that [management and, where appropriate, those
charged with governance acknowledge and understand that they have the responsibility:
(a) For preparation and fair presentation of the financial statements in accordance
with IFRSs;
(b) For such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error; and
(c) To provide us with:
(i) Access to all information of which management is aware that is relevant to the preparation
and fair presentation of the financial statements, such as records, documentation and other
matters;
(ii) Additional information that we may request from management for the purpose of the review;
and
(iii) Unrestricted access to persons within ABC Company from whom we determine it
necessary to obtain evidence.
As part of our review, we will request from [management and, where appropriate, those
charged with governance], written confirmation concerning representations made to us in
connection with the review.
We look forward to full cooperation from your staff during our review.
[Other relevant information]
[Insert other information, such as fee arrangements, billings and other specific terms, as
appropriate.]
[Reporting]
[Insert appropriate reference to the expected form and content of the practitioner’s
report.]
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The form and content of our report may need to be amended in the light of our findings
obtained from the review.
Please sign and return the attached copy of this letter to indicate your acknowledgement of,
and agreement with, the arrangements for our review of the financial statements including our
respective responsibilities.
XYZ & Co.
Acknowledged and agreed on behalf of ABC Company by
(signed)
......................
Name and Title
Date
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Appendix II
Illustrative Practitioners’ Review Reports
Review Reports on General Purpose Financial Statements
Illustrative Review Reports with Unmodified Conclusions
• Illustration 1: A practitioner’s report on financial statements prepared in accordance with a fair
presentation framework designed to meet the common financial information needs of a wide
range of users (for example, the International Financial Reporting Standard for Small and
Medium-sized Entities).
Illustrative Review Reports with Modified Conclusions
• Illustration 2: A practitioner’s report containing a qualified conclusion due to an apparent
material misstatement of the financial statements. Financial statements prepared in
accordance with a compliance framework designed to meet the common information needs of
a wide range of users. (Financial statements prepared using a compliance framework)
• Illustration 3: A practitioner’s report containing a qualified conclusion due to the practitioner’s
inability to obtain sufficient appropriate evidence. (Financial statements prepared using a fair
presentation framework IFRSs)
• Illustration 4: A practitioner’s report containing an adverse conclusion due to material
misstatement of the financial statements. (Financial statements prepared using a fair
presentation framework IFRSs)
• Illustration 5: A practitioner’s report containing a disclaimer of conclusion due to the
practitioner’s inability to obtain sufficient appropriate evidence about multiple elements of the
financial statements resulting in inability to complete the review. (Financial statements
prepared using a fair presentation framework IFRSs)
Review Reports on Special Purpose Financial Statements
• Illustration 6: A practitioner’s report on financial statements prepared in accordance with the
financial reporting provisions of a contract (for purposes of this illustration, a compliance
framework).
• Illustration 7: A practitioner’s report on a single financial statement prepared in accordance
with the cash receipts and disbursements basis of accounting (for purposes of this illustration,
a fair presentation framework).
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Illustration 1
Circumstances include the following:
• Review of a complete set of financial statements.
• The financial statements are prepared for a general purpose by management of the entity in
accordance with the International Financial Reporting Standard for Small and Medium-sized
Entities.
• The terms of the review engagement reflect the description of management’s responsibility
for the financial statements in paragraph 30(b) of ISRE 2400.
• In addition to the review of the financial statements, the practitioner has other reporting
responsibilities under local law.
INDEPENDENT PRACTITIONER’S REVIEW REPORT
[Appropriate Addressee]
Report on the Financial Statements
We have reviewed the accompanying financial statements of ABC Company, which comprise
the statement of financial position as at December 31, 20X1, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with the International Financial Reporting Standard for Small and
Medium-sized Entities, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
Practitioner’s Responsibility
Our responsibility is to express a conclusion on the accompanying financial statements. We
conducted our review in accordance with International Standard on Review Engagements
(ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400
(Revised) requires us to conclude whether anything has come to our attention that causes us
to believe that the financial statements, taken as a whole, are not prepared in all material
respects in accordance with the applicable financial reporting framework. This Standard also
requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with ISRE 2400 (Revised) is a limited
assurance engagement. The practitioner performs procedures, primarily consisting of making
enquiries of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluates the evidence obtained.
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The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not
express an audit opinion on these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that these
financial statements do not present fairly, in all material respects, (or do not give a true and fair
view of) the financial position of ABC Company as at December 31, 20X1, and (of) its financial
performance and cash flows for the year then ended, in accordance with the International
Financial Reporting Standard for Small and Medium-sized Entities.
Report on Other Legal and Regulatory Requirements
[Form and content of this section of the practitioner’s report will vary depending on the nature
of the practitioner’s other reporting responsibilities.]
[Practitioner’s signature]
[Date of the practitioner’s report]
[Practitioner’s address]
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Illustration 2
Circumstances include the following:
• Review of a complete set of financial statements required by law or regulation.
• The financial statements are prepared for a general purpose by management of the entity in
accordance with the Financial Reporting Framework (XYZ Law) of Jurisdiction X (that is, a
financial reporting framework, encompassing law or regulation, designed to meet the common
financial information needs of a wide range of users, but which is not a fair presentation
framework).
• The terms of the review engagement reflect the description of management’s responsibility
for the financial statements in paragraph 30(b) of ISRE 2400.
• Based on the review, inventories are misstated. The misstatement is material but not
pervasive to the financial statements.
• In addition to the review of the financial statements, the practitioner has other reporting
responsibilities under local law.
INDEPENDENT PRACTITIONER’S REVIEW REPORT
[Appropriate Addressee]
Report on the Financial Statements
We have reviewed the accompanying financial statements of ABC Company, which comprise
the statement of financial position as at December 31, 20X1, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements in accordance
with XYZ Law of Jurisdiction X, and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Practitioner’s Responsibility
Our responsibility is to express a conclusion on the accompanying financial statements. We
conducted our review in accordance with International Standard on Review Engagements
(ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400
(Revised) requires us to conclude whether anything has come to our attention that causes us
to believe that the financial statements, taken as a whole, are not prepared in all material
respects in accordance with the applicable financial reporting framework. This Standard also
requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with ISRE 2400 (Revised) is a limited
assurance engagement. The practitioner performs procedures, primarily consisting of making
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enquiries of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluates the evidence obtained.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not
express an audit opinion on these financial statements.
Basis for Qualified Conclusion
The company’s inventories are carried in the statement of financial position at xxx.
Management has not stated the inventories at the lower of cost and net realizable value but
has stated them solely at cost, which constitutes a departure from the requirements of the
Financial Reporting Framework (XYZ Law) of Jurisdiction X. The company’s records indicate
that, had management stated the inventories at the lower of cost and net realizable value, an
amount of xxx would have been required to write the inventories down to their net realizable
value. Accordingly, cost of sales would have been increased by xxx, and income tax, net
income and shareholders’ equity would have been reduced by xxx, xxx and xxx, respectively.
Qualified Conclusion
Based on our review, except for the effects of the matter described in the Basis for Qualified
Conclusion paragraph, nothing has come to our attention that causes us to believe that the
financial statements of ABC Company are not prepared, in all material respects, in accordance
with the Financial Reporting Framework (XYZ Law) of Jurisdiction X.
Report on Other Legal and Regulatory Requirements
[Form and content of this section of the practitioner’s report will vary depending on
the nature of the practitioner’s other reporting responsibilities.]
[Practitioner’s signature]
[Date of the practitioner’s report]
[Practitioner’s address]
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Illustration 3
Circumstances include the following:
• Review of a complete set of general purpose financial statements prepared by management
of the entity in accordance with [a financial reporting framework designed to achieve fair
presentation other than International Financial Reporting Standards].
• The terms of the review engagement reflect the description of management’s responsibility
for the financial statements in paragraph 30(b) of ISRE 2400.
• The practitioner was unable to obtain sufficient appropriate evidence regarding an investment
in a foreign affiliate. The possible effects of the inability to obtain sufficient appropriate
evidence are deemed to be material but not pervasive to the financial statements.
• The practitioner does not have other reporting responsibilities under local law in addition to
the review of the consolidated financial statements.
INDEPENDENT PRACTITIONER’S REVIEW REPORT
[Appropriate Addressee]
We have reviewed the accompanying financial statements of ABC Company, which comprise
the statement of financial position as at December 31, 20X1, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with [name of applicable financial reporting framework, including a
reference to the jurisdiction or country of origin of the financial reporting framework when the
financial reporting framework used is not International Financial Reporting Standards], and for
such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
Practitioner’s Responsibility
Our responsibility is to express a conclusion on the accompanying financial statements.
We conducted our review in accordance with International Standard on Review Engagements
(ISRE) 2400 (Revised), Engagements to Review Historical Financial Statements. ISRE 2400
(Revised) requires us to conclude whether anything has come to our attention that causes us
to believe that the financial statements, taken as a whole, are not prepared in all material
respects in accordance with the applicable financial reporting framework. This Standard also
requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with ISRE 2400 (Revised) is a limited
assurance engagement. The practitioner performs procedures, primarily consisting of making
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enquiries of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluates the evidence obtained.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not
express an audit opinion on these financial statements.
Basis for Qualified Conclusion
ABC Company’s investment in XYZ Company, a foreign associate acquired during the year
and accounted for by the equity method, is carried at xxx on the statement of financial position
as at December 31, 20X1, and ABC’s share of XYZ’s net income of xxx is included in ABC’s
income for the year then ended. We were unable to obtain access to the relevant financial
information of XYZ concerning the carrying amount of ABC’s investment in XYZ as at
December 31, 20X1 and ABC’s share of XYZ’s net income for the year. Consequently, we
were unable to perform the procedures we considered necessary.
Qualified Conclusion
Based on our review, except for the possible effects of the matter described in the Basis for
Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe
that the accompanying financial statements do not present fairly, in all material respects, (or do
not give a true and fair view of) the financial position of ABC Company as at December 31,
20X1, and (of) its financial performance and cash flows for the year then ended in accordance
with [name of applicable financial reporting framework, including a reference to the jurisdiction
or country of origin of the financial reporting framework when the financial reporting framework
used is not International Financial Reporting Standards].
[Practitioner’s signature]
[Date of the practitioner’s report]
[Practitioner’s address]
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